Changes in Energy Mean Big Opportunities

May 3, 2013

By John Boesel

The global transportation energy picture is changing rapidly. The demand for oil is growing as the vehicle population surges in Asia and elsewhere. New technology is enabling greater North American oil production and cheaper natural gas. Advances in electric drive technology are making vehicles much more efficient. After more than three decades of inaction, the U.S. government has gotten in synch with the Japanese, Chinese, and Europeans and has adopted demanding new fuel economy rules. Meanwhile, the threat of climate change is becoming better understood and more real.

What is the bottom line of all of this for the beverage trucking industry? Opportunity. Unprecedented opportunity to do both what is good for the environment and what is good for business.

And, there are options. Not a single course of action—but choices. And good ones at that.

Our organization has approximately 150 member companies from across the nation. Those companies are developing, producing, or using a wide array of clean fuels and technologies—ranging from clean diesel to biodiesel to hydrogen and hybrids. As a result, we are in a great position to understand the real-world strengths and weaknesses of the various options, and how they can best be applied in the marketplace.

In the medium- and heavy-duty sector, the segment that has done the best job of reducing its dependence on oil and moving toward cleaner fuels is the transit sector. Over 50 percent of new transit buses sold each year are either powered by a clean fuel or use an electric or hybrid propulsion system. One of the key reasons for transit’s leadership is something they have in common with the beverage industry. By and large, the vehicles in these two segments operate on relatively fixed routes and return home every night. This is a huge advantage that could allow the beverage sector to not only catch up with transit but become the leading segment in terms of reducing its dependence on oil, improving air quality, protecting our environment, and strengthening our nation. And be more profitable.

I want to briefly identify four cost-effective options that are available to, and currently being used by the beverage industry.
Natural Gas: Fleets can now lock in very attractive pricing for natural gas that can result in a 2-3 year payback. Purchasing the natural gas trucks and the fueling station does require a higher upfront investment, but after 2-3 years, the savings of $1-2/per diesel gallon equivalent can really contribute to the bottom line. Monarch Beverage in Indiana is one of the leading fleets making use of natural gas. By 2015 Monarch will have reduced its dependence on oil by 85 percent!

Hybrid Trucks: Fleets like Coca Cola Refreshments and Powers Distributing in Michigan have found real benefit in switching to hybrid technology. Deploying the tech in the right application can result in 30 percent reduction in fuel use. The key is using hybrids in routes where there is a lot of stop/start driving and the annual mileage is greater than 20,000 miles per year. Eaton, the major hybrid propulsion system supplier, recently announced plans to come out with a battery pack that will help improve fuel economy by up to 10 percent, while costing the same amount. Hino is just entering the U.S. market with integrated trucks and is offering pricing that can result in a two-year payback. We can expect more innovations in this sector to improve hybrid technology. An additional benefit of hybrid technology is that it can be easily combined with low carbon bio- or renewable diesel. This combination can help a fleet reduce its oil dependence by 50 percent.

Propane: A domestically available fuel that is cleaner than gasoline and diesel, propane, like natural gas, can provide significant cost savings. Distributors like Kentucky Eagle have been able to partner with local propane providers and have been able to save nearly $2 per gasoline gallon equivalent. Roush Cleantech is partnered with Ford and can provide up-fitted trucks and cabs with the same performance and warranty as their gasoline equivalents.

Electric Trucks: Battery electric trucks are just starting to be used in the beverage sector. Coca Cola Refreshments has a small number now and Pepsi’s sister company, Frito Lay, has the largest electric truck fleet in the nation. Presently, according to CALSTART testing and modeling, in states like California and New York where incentives exist, the payback on electric trucks can be as early as five years. That payback period is expected to increase significantly over the next 2-4 years as battery prices continue their downward trend.

Which of these options will make the most sense for you? It’s a good question to ask and the answer will vary depending on the region you operate in, the incentives available, and the duty cycle of your trucks. If you are interested in getting some help exploring those options, I encourage you to contact Bill Van Amburg, our senior vice president, at bvanamburg@calstart.org.

In closing, many fleets are telling us they are moving toward different fuels and more efficient drivetrains, because they have seen too much volatility in the global oil market, and find it hard to plan for the future. The good news now is that there are options that will allow for more predictability. A fleet manager now can pursue options that reduce over-all fuel usage, and switch to cleaner, lower carbon fuels that provide better financial results. This is good news for the environment and the bottom line.

John Boesel is president and CEO of CALSTART, a member-supported organization of more than 150 firms, fleets and agencies worldwide dedicated to supporting a growing hightech, clean transportation industry across North America that cleans the air, creates jobs, cuts imported oil and reduces global warming emissions. The organization provides services and consulting to spur advanced transportation technologies, fuels, systems and the companies that make them